Safe Harbor Protects Supplier of Active Ingredient for ANDA


This article appeared on Law360 on September 29, 2015 and is reprinted with permission. 

After receipt of a so-called Paragraph IV Notice from a generic company, a patentee — the brand company — has 45 days in which to file suit to secure a 30-month stay of U.S. Food and Drug Administration approval of the generic's abbreviated new drug application. Not much time! But who does the brand sue? The applicable statute, 35 U.S.C. § 271(e)(2)(A), envisions suit against the ANDA "submitter." Yet this is complicated where multiple organizations are involved in the "submission." Can suit be instituted against those that merely "aid and abet," i.e., induce, the ANDA filing? These considerations are significant because relief under § 271(e)(4) (A)-(C) is available only against named defendants. On Sept. 24, the Federal Circuit, in Shire LLC v.Amneal Pharmaceuticals LLC, Nos. 2014-1736, 2014-1737, 2014-1738, 2014-1730, 2014-1741, Slip. Op. (Fed. Cir. September 4, 2015). clarified the law on whether entities who merely assist an ANDA filer are liable for inducing infringement. The prior holdings — both district court and Federal Circuit — were somewhat inconsistent on this issue.

Before discussing Shire, however, a brief review of who may be sued when an ANDA is filed is instructive.

Direct Infringement by Submission of an ANDA

The Federal Circuit and various district courts have addressed the issue of who is a "submitter" under § 271(e)(2)(A). For example, in In re Rosuvastatin Calcium Patent Litigation, 703 F.3d 511 (Fed. Cir. 2012), Apotex Corp. ("Apotex U.S.), the U.S. subsidiary of Apotex Inc. ("Apotex Canada"), "signed and filed" an ANDA on behalf of Apotex Canada. The paragraph IV certification, however, was made by Apotex Canada. After Astra Zeneca filed suit against Apotex U.S. — and not Apotex Canada — the defendant moved to dismiss arguing it did not "submit" the ANDA within the meaning of § 271(e)(2)(A). It cited 21 U.S.C. § 355(j), which identifies the ANDA applicant as "the person or entity who submits an ANDA." Id. at 528; see also 21 C.F.R. § 314.3(b).

The district court held that Apotex U.S. did "submit" the ANDA. The Federal Circuit affirmed because Apotex U.S. "filed the ANDA and actively participated with Apotex Canada in [its] preparation, and [it] intend[ed] to benefit directly from the ANDA by selling the drug product in the United States … upon approval of the ANDA." Id. at 527. In so doing, the court noted:

[A] wholly-owned subsidiary of a foreign ANDA applicant, which signs an ANDA as the agent of its parent-applicant, and which intends to benefit directly if the ANDA is approved by participating in the manufacture, importation, distribution and/or sale of the generic drug [i]s subject to suit under § 271(e) as the one who has "submitted" the ANDA. Id. at 528.

In a concurring opinion, Judge S. Jay Plager quoted a portion of § 271(e)(2) and emphasized the post-approval conduct, i.e., Apotex U.S. filed the ANDA in order to sell the drug product after FDA approval.

It shall be an act of infringement to submit an application ... if the purpose of such submission is to obtain approval ... to engage in the commercial manufacture, use, or sale of a drug claimed in a patent. Id. at 529.

Judge Plager believed that an agent that merely files an ANDA for another party does not "submit" the ANDA under § 271(e)(2)(A). Specifically, merely assisting in "planning, preparation and submission of the ANDA" does not create liability. Id. at 530. Rather, the real party-in-interest is the "commercial manufacturer — who is the statutory applicant who 'submit[s]' the application and commits the act of infringement." Id. at 530. Apotex U.S. was deemed a "submitter" under Judge Plager's view because it assisted its affiliate in preparing and submitting the ANDA and because Apotex U.S. intended to market the drug in the United States after approval. Id. at 531. Accordingly, where two companies are affiliates and both are involving in preparing and filing the ANDA, and the actual filer will market the drug, the filer can be considered a "submitter". Here, it is anomalous that Astra did not join Apotex Canada as the latter submitted the ANDA and filed the Paragraph IV certification.[1]

Other decisions have relied on the corporate relationship between two affiliates, particularly a parent-subsidiary relationship, in holding that both were "submitters." In AstraZeneca Pharmaceuticals LP v. Aurobindo Pharma Limited, 2009 WL 483131 (D. Del. Feb. 25, 2009), an employee of Aurobindo USA signed an ANDA on behalf of its parent. AstraZeneca sued both companies and Aurobindo USA moved to dismiss because it did not prepare or file the ANDA; rather, its parent did. The motion was denied. Similarly, in Wyeth v. Lupin Ltd., 505 F. Supp. 2d 303 (D. Md. 2007), LPI, a wholly-owned U.S. subsidiary of Lupin Ltd. ("LTD"), acted as LTD's registered agent for an ANDA filing.[2] Wyeth sued both entities, and LPI moved to dismiss. The court denied the motion, noting that LPI was a wholly owned subsidiary of LTD that existed to distribute foreign-produced generic drugs in the U.S. See id. at 308; see also Aventis Pharma Deutschland GMBH v. Lupin Ltd., 403 F. Supp. 2d 484, 491-96 (E.D. Va. 2005) (denying motion to dismiss because LPI served as an agent on LTD's behalf, countersigned the ANDA, and would market the drug product after approval.);Novo Nordisk A/S v. Caraco Pharmaceutical Laboratories Ltd., 450 F. Supp. 2d 757, 760-61 (E.D. Mich. 2002) (Motion to dismiss by parent and majority shareholder denied under piercing of the corporate veil theory); In re Oxycontin Antitrust Litigation, 04-MD-1603 (SHS) (S.D.N.Y.), Op. of Oct. 19, 2012 (noting financial interest in the ANDA filer in denying the investor's motion to dismiss).

In sum, a complaint should not only emphasize the corporate relationship between parties that participate in the preparation and submission of the ANDA but also stress that the company (or companies) that will manufacture and/or distribute the approved drug product. The complaint should also specify any benefits — economic or otherwise — that the potential defendant will receive from the ANDA approval.

Third parties, i.e., nonaffiliated companies, who provide assistance to ANDA filers by supplying the active pharmaceutical ingredient (API) are not direct infringers under § 271(e)(2)(A) because they did not "submit" the ANDA. See Smithkline Beecham Corp. v. Geneva Pharmaceuticals Inc., 287 F. Supp. 576, 585-86 (E.D. Pa. 2002); SmithKline Beecham Corp. v. Pentech Pharmaceuticals Inc. 2001 WL 184804 at *3 (N.D. Ill. Feb. 20, 2001).

Inducement of Infringement

Although not liable as a direct infringer, a company that provides assistance to an ANDA filer may be liable as an inducer under § 271(b). But it was unclear whether a § 271(b) claim lies where the only "inducement" is in the ANDA filing or whether inducement of future sales is required to state a valid claim. Further complications arose because § 271(e)(1), the Hatch-Waxman safe harbor, states that is not an act of infringement "to make, use, offer to sell, or sell within the United States or import into the United States a patented invention … solely for uses reasonably related to the development and submission of information [to the FDA]." Does this provision shield the "inducer" who merely aids in an ANDA filing? Before Shire, the answer was not clear.

In AstraZenca AB v. Mylan Laboratories Inc., 265 F. Supp. 2d 213 (S.D.N.Y. 2003), Astra, after failing to obtain discovery from two foreign companies, sought to amend its complaint to add them as parties. The two companies had supplied the API and other technical information to Mylan for its ANDA filing. The court dismissed the action against the two foreign defendants and held that although an action for inducement of infringement is possible, "an action for inducement for aiding and abetting the filing of an ANDA is unavailable." Id. at 217-18.[3]

If this Court accepted Astra's theory of liability in this action, active ingredient suppliers would be discouraged from contributing to an ANDA for fear of liability for inducement. This result is contrary to one of the primary purposes of Hatch-Waxman's statutory exemption from liability for making, using, or selling a patented invention for the purpose of submitting an ANDA, namely, to "enable[] generic manufacturers to test and seek approval to market during the patent term." Id. at 218.[4]

In Pfizer Inc. v. Ranbaxy Laboratories Limited, 321 F. Supp. 2d 612 (D. Del. 2004), the court held that no claim for inducement of an ANDA filing is proper even where the two named defendants enjoyed a parent-subsidiary relationship. In dismissing the action, the court stated:

The activities described in Section 271(e)(1) are activities involved in the preparation of an ANDA filing. As the Federal Circuit recognized in considering this section, "a generic drug manufacturer is free from liability for patent infringement based solely upon action necessary to prepare the ANDA." To allow one to be liable for inducement of infringement based solely on activities related to the preparation of the ANDA filing would undercut Section 271(e)(1) and discourage entities from participating in the research and other activities needed to submit an ANDA application, a result which is clearly at odds with the purposes of the Hatch-Waxman Act, and therefore, I decline to adopt such an interpretation. Id. at 618; see also Ortho-McNeil Pharmaceutical Inc. v. Mylan Laboratories Inc., 267 F. Supp. 545, 548-49 (N.D.W. Va. 2003) (merely supplying API for an ANDA filing is not actionable as inducement against a third party). Contra Shire LLC v. Mylan Inc., 202 WL 2072665 (D.N.J. June 7, 2012) (third party can be liable for assisting in an ANDA filing).

An inducement claim was strongest where the proposed defendant will supply product for commercial marketing after approval. In Smithkline Beecham Corp v. Geneva Pharmaceuticals Inc., 287 F. Supp. 2d 576 (E.D. Pa. Oct. 1, 2002), the court permitted SKB to amend its complaint to add Sumika, which had filed a Drug Master File ("DMF") with the FDA and authorized Geneva to rely on it. Significantly, however, Sumika — although a third party — would manufacture and sell the generic product after approval. See id. at 585; see also, Smithkline Beecham Corp. v. Geneva Pharms Inc. 2001 WL 1840804 (N.D. Ill. Feb. 20, 2001); Celphon, Inc. v. Watson Pharmaceuticals Inc. 629 F. Supp. 2d 338, 349-50 (D. Del. 2009); Wyeth v. Lupin Ltd., 505 F. Supp. 2d 303, 308 (D. Md. 2007); Aventis Pharma Deutchland GMBH v. Lupin Ltd., 403 F. Supp. 2d 484, 495 (E.D. Va. 2005).

In 2007, the Federal Circuit entered this discussion in Forest Laboratories Inc. v. Ivax Pharmaceuticals Inc., 501 F.3d 1263 (Fed. Cir. 2007). There, Forest sued Ivax for filing an ANDA and Cipla, the intended supplier of the approved drug product. After trial, the court enjoined both Ivax and Cipla from making, using and selling the patented drug. The defendants argued that the scope of the injunction was too broad because supplying information for an ANDA filing is not inducement. The Federal Circuit majority held that the arrangement between the two defendants "was undoubtedly a cooperative venture and Cipla was to manufacture and sell infringing products to Ivax for resale in the United States." Id. at 1272. It would appear that the key fact was Cipla's commitment to supply API after approval. In that regard, the Federal Circuit stated:

Cipla is providing information, and will provide material, that Ivax will use to obtain FDA approval. Up to that point, there is indeed no infringement. And, in fact, Ivax is not currently liable for infringement, as long as it is only pursuing FDA approval, not commercially manufacturing or selling the infringing product. However, just as Ivax will be liable for, and hence is being enjoined from, the commercial exploitation of the [patented drug] when it is approved by the FDA and during the life of the patent, so should Cipla be enjoined. They are partners. Id.

Judge Alvin A. Schall, in dissent, held that Cipla's activities in connection with the ANDA filing were protected by § 271(e)(1), and Cipla could not be enjoined from similar conduct in the future. Id. at 1272-74 (Schall, J. dissenting). Thus, under both the majority and dissent, it would appear that merely assisting in an ANDA filing does not induce infringement. The uncertainty in Forest was addressed in Shire.

Later, however, in Gilead Sciences Inc. v. Teva Pharmaceuticals, 2011 WL 2462764 (S.D.N.Y. June 3, 2011), the court allowed Gilead to amend its complaint to add Cipla because the latter had supplied the API for Teva's ANDA filing. It is unclear whether Cipla agreed to supply API to Ivax upon FDA approval. But it does not appear that the court viewed this fact as critical. See id. at *4 n.2. In In re Cyclobenzapine Hydrochloride Extended-Release Capsule Patent Litigation, 693 F. Supp. 2d 409, 418 (D. Del. 2010), however, the court seemingly held that inducing an ANDA filing is not actionable; rather, assistance after FDA approval in the manufacture or sale of the drug product is required before liability attaches.

More recently, in Shire LLC v. Amreal Pharms. LLC, 2014 WL 2861430 (D.N.J. June 23, 2014), a somewhat confusing opinion, the court denied the summary judgment motion ofJohnson Matthey ("JM"), the DMF holder, who had supplied the API for the ANDA, and granted the brand's motion that the supplier was liable for inducement. It was unclear whether the mere assistance in the ANDA filing was sufficient or whether additional allegations of post-approval conduct were required. On appeal, the Federal Circuit reversed.

The court held that since "Johnson Matthey did not submit and ANDA, it cannot be liable for infringement under §271(e)(2)." Slip. Op. at 16. More importantly, the court also held that JM's activities — "up to this point" were protected by §271(e)(1).

Johnson Matthey is correct that it cannot be liable for the API it sold the ANDA defendants up to this point. Johnson Matthey, as an API supplier, has thus far done nothing more than provide material for use by the ANDA defendants in obtaining FDA approval. … [T]hese sales, and the ANDA defendants' use of the API for filing the ANDA were "reasonably related to the submission of an ANDA." As such, Johnson Matthey's activities are protected by the safe harbor of §271(e)(1), and the district court erred by entering judgment that Johnson Matthey has induced infringement. Slip. Op. at 15.

In conclusion, the court noted that Forest did not require a different result as it "involved the scope of an injunction under 274(e)(4)." Since no injunction had been issued against Shire, Forest was inapplicable. It is now clear that an independent entity that merely assists an ANDA filer in such filing is not liable as an inducer. If, however, that party will supply commercial quantities of the API after approval or is related to the actual filer, an infringement claim may still be possible.

[1] The Federal Circuit noted that it made no judgment regarding a possible future suit against Apotex Canada. Id. at 528 n.3.

[2] 21 C.F.R. §314.50 (a)(5) requires that when a foreign entity submits an ANDA, it must be "countersigned, by an attorney, agent or other authorized official who resides or maintains a place of business in the United States."

[3] It was alleged that the foreign companies would supply the API to Mylan after FDA approval, but this fact was seemingly overlooked in the court's decision.

[4] In Allergan v. Alcon Labs, 324 F.3d 1322, 1326 (Fed. Cir. 2003) and Warner-Lambert Co. v. Apotex Corp., 316 F.3d 1348, 1365-66 (Fed. Cir. 2003), the Federal Circuit sanctioned a § 271(b) claim in a Hatch-Waxman suit. However, those decisions analyzed whether the approved product would infringe the patent-in-suit and not whether mere inducement of an ANDA filing created a viable claim.